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What can local governments do to bring and keep jobs?
Welcome to The Independent Forum. Every week we ask a different question and solicit responses from a diverse group of New Mexico thinkers, pundits and other observers of the state’s political landscape. We’ll add more responses as they come in, so keep checking back to see how the conversation progresses.
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On Tuesday, The Independent, KNME and KUNM teamed up for a live event with New Mexico mayors, and we talked about what they’re doing to shore up local economies and how they’re trying to create and retain jobs.
This week’s question is: What innovative steps can local governments take to bring good jobs to New Mexico—and keep them here?
MARTHA BURK, Gov. Richardson’s senior policy advisor on women’s issues:
Well, I’m a liberal of course so I guess that makes me part of the “big government” crowd. So I think we need something like local WPAs, meaning hire more government workers to do infrastructure and administrative work for state and local functions instead of contracting everything out. It would provide good jobs with benefits, cut out the middlemen in private contracting, and just incidentally cut out some of the kickback and siphoning schemes that seem to keep popping up when public services are privatized.
I know of something governments can do that might not directly create jobs, but would certainly create a suitable environment for sustainable economic growth: transparency reforms. On the international scene, there has been a lot of research suggesting that government transparency and economic growth are closely correlated, particularly for governments that are heavily dependent on revenue from extractive industries. What’s more, transparency is cheap to implement and popular with citizens across the political spectrum. Here’s a quote I found from an abstract of a 2005 paper by Daniel Kaufmann and Ana Bellver:
“Mindful of the challenges in inferring causality, we also find that transparency is associated with better socio-economic and human development indicators, as well as with higher competitiveness and lower corruption. Much progress can be attained without requiring inordinate amount of resources, since transparency reforms can be substantial net ‘savers’ of public resources, and often can serve as a more efficient and less financially costly substitute to creating additional regulations and/or regulatory or governance bodies.”
That ‘higher competitiveness’ is key when we consider that New Mexico is competing with other states for high-paying jobs. Bottom line, rooting out corruption and putting top-to-bottom transparency reforms in place would be good for business.
Sadly, local governments have little capacity to create jobs. Politicians will quickly tell you about the things they are doing in that regard, but they don’t have that many arrows in the quiver in real life. They don’t control much of the tax equation, and certainly don’t control the cost, supply and quality of labor or quality of schools. For “big deals,” they do have some ability to negotiate land use, capital infrastructure spending, and the ability to issue industrial development revenue bonds (IRB’s) – a powerful tool allowing a local government to provide state and local tax breaks for a small number of targeted recipients.
Here in Albuquerque, economic developers worked hard and used those tools to attract companies, like Schott Solar and Fidelity Investments, that we’re lucky to have and were right to have pursued. However, the cost benefit question is never fully answered and politicians don’t always have the best track record when picking winners and losers for local subsidy. Combine that with the fact that most job creation falls outside of the really large employers we can target with those tools, the most important thing local governments can do is to provide the best and most cost effective services that their voters require. Making the proverbial trains run on time isn’t always the most sexy platform, but it’s the reason we have state and local governments to begin with. The focus should be on doing those jobs well – providing basic needed services and protecting the interests of the residents – but not in any unnecessary or ill-reasoned way that gets in the way of job creation by the average business and improved standard of living for the residents.
Success at bringing good jobs to New Mexico will be defined by how well we execute at the local and regional levels. The role of state and federal government, I think, is to create an environment for development to flourish, but the execution has to be done locally and regionally. We should focus on impactful policy areas and create strategies that accelerate growth and create jobs. Areas like entrepreneurship and innovation, exports and international trade, infrastructure investments, workforce development and training and taxes and regulation would be good places to start. Our local and regional economies in New Mexico should create partnerships comprised of both private and public sector leaders. These partnerships throughout New Mexico should look at the above mentioned areas and get specific in each of those areas. For example, in the area of entrepreneurship and innovation, we should focus on new business and technology-based developments and productivity along with retention strategies that emphasize financial incentives and investments. Streamlining governmental regulation, optimizing taxes, and getting the education issue fixed in New Mexico to insure a more highly skilled work force should be other specifics that fall out of that analysis and there is more. We need to resist the mindset that growing government, i.e. economic stimulus plans one after another and regulating private business even tighter now is the answer to creating good jobs. When we think along those lines, we do more damage to creating good jobs.
Local governments in New Mexico, while constrained by the policies enacted in Santa Fe, do indeed have many arrows in their quivers for spurring economic growth and thus bringing jobs to New Mexico.
First and foremost, having straightforward and fair regulations in terms of zoning, construction, permitting, and other functions of government is paramount. In Hernando de Soto’s groundbreaking book, “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else,” de Soto explored the difficulties in various nations that entrepreneurs face in turning ideas and hard work into wealth. Most of these difficulties stemmed from government rules and regulations ostensibly designed to benefit workers and the poor, but that end up making everyone poorer. The easier it is to set up and operate a legitimate business in Albuquerque (or any other New Mexico city), but wealthier the citizens of that city will be.
The second major thing that cities can do is to not fall for economic development schemes. Some involve governments picking winners and losers in business. Sure, Eclipse Aviation and the long line of solar companies that have set up shop here (all with heavy subsidies), may have seemed like sure things, but politicians are not in a position to have the most information on the prospects of these businesses. Worse, because it is taxpayer money, not their own money, they don’t have the incentive to get all the necessary information. Low, flat, and fair taxes are much better at boosting economic growth than massive “corporate welfare” to particular industries.
The same thing goes with massive government spending projects like the streetcar from a few years back and the convention center expansion/events center that continues to come up year after year. Government should stick to the basics rather than spending massive amounts of taxpayer dollars on baubles.
Lastly, while tax cuts may not be in the cards in an economic downturn, city governments can and should make their workforces as efficient as possible. Simple things like stopping the rich payouts of unused sick and vacation time are a start, but demanding that government workers either do the work as efficiently as private sector workers or allow the private sector to take over is an important step as well. Solid waste collection, golf course maintenance, and janitorial services in government buildings are just a few public services that can often be done more cheaply and efficiently by the private sector. Government workers should at least face market discipline in the form of competition for this work. The former Mayor of Indianapolis, Stephen Goldsmith, used the “phone book test.” If a government service was being provided by two or more companies in the phone book, government should probably be buying the service from those companies rather than doing it in-house.
These kinds of efficiency can help close budget deficits when times are good, result in surpluses when times are good, can improve the quality of services, and ultimately result in lower taxes or the ability to shift scarce government resources to more pressing needs.
This is a good start and if Albuquerque or any other city in the state follows these three basic principles, that city will see an improved business climate, job growth, and ultimately, wealth creation for its citizens.